InBev Q1 profit drops 11 percent

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Brewer of Stella and Beck’s blames drop on weak beer sales in Brazil.

8 May 2008

BRUSSELS - InBev SA, the brewer of Stella and Beck's, posted an 11 percent drop in first-quarter net profit on Thursday, blaming higher food prices for weak sales in Brazil, where it conducts half its business.

The company also pinned the "worse than expected" results on rising costs for transport and raw materials such as malt, rice and hops as well as the effect of strong earnings a year ago.

Higher costs are forcing InBev to raise beer prices in many of the regions where it operates, the company said.

InBev's profit fell to EUR 249 million in the first three months of the year, down from EUR 280 million in the same period in 2007.

It came in well below a forecast of EUR 341 million by analysts surveyed by Dow Jones Newswires.

Revenue rose 4.8 percent to EUR 3.19 billion, up from EUR 3.05 billion, again missing analysts' more optimistic forecast of a 9 percent surge.

Overall volume sales fell 0.4 percent. InBev now depends largely on sales in South America and emerging markets in Eastern Europe and Asia for growth as drinkers in Western Europe and North America consume less and turn to wine.

The company said weak results from Brazil and Russia hit volumes hard. In Brazil, it said bad weather and an early carnival reduced the summer period when it would sell more beer.

Brazil's consumer market was also showing "some softness" driven by food inflation of more than 11 percent, it said, but was confident that beer sales would pick up during the rest of the year. Russia was affected by strong shipments in the final quarter of 2007, it said.

However, efforts to boost sales in the United States and Canada are paying off with a distribution deal under which Anheuser-Busch sells more of InBev's European beers. That helped volumes grow by 2.9 percent from a year ago - with surging imports of Stella Artois lager up by nearly a fifth.

In Western Europe - the company's second major market - sales fell slightly as InBev stripped out lower-value products from its range.

Both Germany and Britain saw sales increase as new beer types rolled out and Stella Artois gradually recovered in Britain. The high-alcohol lager had been hit by strong competition as well as a debate on excessive drinking.

[AP / Expatica]

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